The rupee was recovering against the dollar on Thursday, gaining Rs4 in the interbank market, with analysts attributing the development to the announcement of a $2.3 billion loan from Chinese banks.
According to the Forex Association of Pakistan, the rupee appreciated by Rs4 to reach Rs206.50 at 12:37pm from the previous day’s close of Rs210.50.
Mettis Global Director Saad Bin Naseer stated that the rupee’s correction was “long due”.
“With news of foreign exchange inflows from China and an imminent deal with the International Monetary Fund (IMF), we believe the rupee will gain strength in the coming sessions,”.
“As inflows rise, we expect exporters — who have been holding their earnings abroad — will panic and remit their earnings back in view of the appreciation in rupee’s value against the dollar,” he added.
Komal Mansoor, head of research at Tresmark, said market sentiment had taken a U-turn on the “influx of positive news”.
“Exporters have also started selling dollars in spot and forwards. A gradual strengthening of the rupee will encourage them to sell more, thereby improving liquidity position,” she said.
Analysts believe that some exporters are still waiting for actual flows to materialise before taking any action, she added.
Zafar Paracha, a currency dealer, said today was “another good day for Pakistan’s economy”. He predicted that the local currency would continue its recovery in the coming days.
He also foresaw that the price of the dollar would go down by Rs8-10 once the country receives the tranche from the Fund.
On Wednesday, Finance Minister Miftah Ismail said that Chinese banks had signed an agreement for about a $2.3 billion loan that would flow into Pakistan’s account within a couple of days.
Since February, Pakistan has been seeking a rollover of loans expiring very shortly to support the fast-depleting foreign exchange reserves of the State Bank of Pakistan that stood at $8.99bn as of June 10.
At the same time, the government had also reached an understanding with the IMF on the federal budget for 2022-23, leading to the revival of the extended fund facility (EFF).